President George W. Bush’s decision this week to ask Congress to renew his fast-track trade promotion authority (TPA) will be greeted with relief by US trading partners as a sign of Washington’s continued commitment to further progress on trade. They should not exhale too soon.US trade policy is entering its most perilous phase in two decades. But, if adroitly handled, this year could be an opportunity to shore up long-waning US domestic support for trade.
Mr Bush has little choice but to ask Congress for the extension. While there are signs of life in the Doha round of world trade negotiations, no final deal will be completed in time to meet the July expiration of TPA, which allows the president to submit trade agreements to Congress for a straight up or down vote. Nor will big US bilateral negotiations with Korea,Malaysia and Thailandbe completed by the deadline.
Without a TPA renewal, Mr Bush’s legacy on trade will be thin, composed of a hodge-podge of bilateral agreements with small countries that account for a tiny fraction of US exports and imports. However, with Democrats controlling the Congress, Mr Bush will have to pay heavily to get what he wants. A shaky coalition of Republicans and a smattering of Democrats gave Mr Bush victory by a single vote on TPA the last time it came before the House of Representatives, in 2001. That coalition was shattered by the November election. In particular, more than three dozen new Democratic members—dubbed the “Lou Dobbs Democrats” after the CNN broadcaster who rails against free trade, outsourcing and illegal immigration—see in their election a mandate to change direction on trade policy.
“The sentiment is very, very clear up here,” a Democratic aide told me.
“And it’s only become clearer with the new members. They think our trade policy is off the rails.”
That means Mr Bush will be forced into a difficult negotiation with Congress. If a deal can be reached, the most likely outcome is an omnibus package of measures that will link renewal of TPA to tougher measures against China, reinforcement of US laws against unfair trade and other steps to aid ailing US manufacturers and their employees. Such moves are guaranteed to produce anxiety in both Europe andAsia.
The last time the stars were similarly aligned was in 1988, when Republican President Ronald Reagan faced an identical dilemma. Import competition from Japan had hurt the US motor, steel and semiconductor industries, Democrats had regained control of the Senate in 1986 and Mr Reagan needed an extension of fast track to complete the Uruguay round of trade talks. The outcome troubled many free traders. In particular, the Democratic Congress created the infamous Super 301 provision requiring the administration to use the threat of unilateral trade sanctions to force countries to open their markets to US goods.
The debate this year is likely to cause similar consternation. At the very least, Congress will insist on measures to allow US companies to block imports from their Chinese competitors if they can demonstrate that such products were unfairly subsidised by the Chinese government. It will also try to hit back against recent World Trade Organisation dispute panel decisions that have weakened the US ability to restrict imports it considers unfairly dumped. Congress is also certain to insist on tougher labour and environmental standards in future trade agreements and to increase assistance for workers displaced by import competition.
And that is the best-case scenario. There is a danger, though slight, that Congress could embrace more blatantly WTO-illegal measures, such as the repeated threat to slap tariffs on Chinese imports if China does not move faster to revalue its currency.
For the rest of the world, is it worth paying such a price to maintain TPA authority in theUS? As long as the administration insists that Congress stays within WTO rules, the answer is almost certainly Yes. Again, 1988 is instructive. While Super 301 was an irritant, theUS administration used its fast-track authority to complete the North American Free Trade Agreement and the Uruguay Round—the most sweeping trade-liberalising deals in modern history. As in 1988, the anxieties among many Americans about trade must be addressed. Without revitalised domestic support, there is no chance of progress even with the trade deals currently on the table, much less building on them for the future.
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